Wednesday, February 23, 2011

I listened to a law school dean talk about the law school bubble. It was interesting. We talked later as well and then I talked with others. This is a mix of what was said, my thoughts and the thoughts of others on the recent discussion about the law school bubble.

First, one thing that a law school can do to move itself up in the rankings is to spend more money (it does not matter on what), which has been driving increased tuition rates. The explosion in tuition has occurred across the board.

Second, historically, about 1 to 1.5% of lawyers were in “big” firms, that is, firms with nine or more lawyers. Those firms made about four to five times as much money per lawyer as the small firms did, but most legal services were “general practice” style services.

If you take the benchmark date, when lawyers made 4k and 21k (normal and “large firm”), 45% of lawyers had graduated college, 75% had graduated from a law school.

In 1975 7% of lawyers were government lawyers. In 1995, 7% were government lawyers. The shift was to firms doing “corporate” law of one type or another while the government sector remained the same.

All of the change was pushed by the Cravath model, which involved many associates rather than traditional law firms where the partners always outnumbered the associates.

’74 154 schools. In 2008 we were closing on 200 -- because law schools generate revenue for univesities.

Third, income for law school graduates has always been trimodel. There is a sharp peak at the high extreme (whether $21k in the benchmark year of $140k+ now – note a non-equity partner at a biglaw firm will make between $140 to $200k after overhead). The modes are the two extremes (the sharp narrow peak at the high end, a wide and flatter peak at the low end, and a wide, shallow plateau that bridges the middle -- often ignored as it is quite shallow, but it is quite wide -- so it picks up a lot of people).

In 1991, the average/mean was very close to the low peak (which was more like ^|-- That is a peak and a short shelf, with the average for lawyers on the low end of the shelf – and the higher compensation part of the distribution was a long and very flat tail). The size of the large peak on the high end has gotten bigger and “average” or mean income is now in the middle so that average numbers vastly over-report the income of most lawyers (--^^-----|----^ for the distribution).

Remember, “biglaw” is a category that did not exist, really, in 1970 and that has really grown since – fueled by the use of associates to leverage things (associates that, mind you, are often negative in their contribution to actual net output for a client).

Fourth, higher education has been very resistant to bubbles collapsing. Instead the burn rate of students into educational waste product just increases – much like the old models for law schools that flunked out half of each incoming class. That failure rate did not dissuade people from applying to law schools in the past.

For a modern equivalent, consider the MFA degree, or the PhD in Philosophy. A narrow band of philosophy programs can find employment for their PhDs. The rest graduate them to zero job prospects. MFAs seem to exist to complain about the lack of meaningful employment. Yet the students keep coming

Note that if legal education cost less, you would be graduating students who could be expected to be able to afford being the kind of lawyers that they will be employed as (if you have $10k in debt, a $40k job isn't so bad. If you have $200k in debt, a $40k job is a real issue). Instead, all (ok, almost all) of the schools are charging tuition that only makes sense if you are going to a “top 25” (one of the 40 schools in the top 25) and with sufficient class rank (which varies by school) to go biglaw. Once you drop into the bottom 75% of schools, (or the bottom 150 schools) big law employment from those schools is so small as to be statistically not sufficient for the tuition model.

The solutions that have been proposed include:

·Having law schools teach skills that would turn students into attorneys. Law schools dislike this solution as it requires them to teach things they are currently not set up to teach. Especially for traditional law employment, where a law student would go into solo practice (when 75% of all lawyers were solos and 15% were two person partnerships), skills training is really important.

oLaw schools want law firms to provide this training. That is fine for biglaw set-ups. It is, of course, almost impossible for the economics of smaller offices.

oThe alternative is some sort of post law school training by law firms, the bar association or post graduate education systems. Some sort of 2 years of law school, then one year somewhere else where they promise the proper post-law school training will occur.

·Reducing law school to two years (would cut the cost by 1/3 but would also accelerate the growth of lawyers in society)(and reduce even further the amount of possible training).

·Capping law school expenditures and tuition.

·Closing law schools that do not pass sufficient proportion of their students through the bar exam. The ABA has stated it will be withdrawing accreditation, I have not seen that happen yet, but then there is lots I don't see.

·On-line and other non-traditional methods of educating students for less.

The dean did not think there was a bubble as far as law schools were concerned, but that does not mean that there is not a bubble as far as the profession is concerned. No one benefits from human detritus being created by law schools the way many universities produce failed PhD candidates. Schools owe students more. Just imagine if the number of graduates went up by 50% (which is what reducing law school from three years to two years does) and that increased 50% was less qualified (by grades and test scores) and less skilled. The economic model that law schools are in requires the same number of students at each school. If students go through more quickly, you can imagine the results.

Anyway, you’ve got what he said and my comments and glosses, mixed together, together with some observations from a friend who is a partner at a biglaw firm and some others.

Interesting to think about.

As an aside, it also makes an interesting point of BYU's resistance to raising tuition. One, that makes it easier for graduates to have successful careers that are economically justified even if they do not get into large law firms. Two, once you calculate the impact of tuition changes on rankings, it explains a good deal of the slide from around 30 to around 40 (expenditures per student, even if just in tuition that is off-set by giving scholarships back or even if it just goes straight to salaries of teachers, while it does not have a large weight in the rankings, can have a large impact because of the way the distribution sets. Interesting things you learn from statistical analysis).

Also helps me understand why so many schools have embraced increased tuition. Of course it results in something similar to an arms race once it gets started. Not to mention, the math was fascinating to see explained.

Wednesday, February 16, 2011

Courtney would have been nineteen today, the 16th of February. Jessica would have been twenty-five on the 12th. Robin would have turned fourteen later this year. I have to admit, I am weak. In many ways I am still completely undone by their deaths in the time between 1993 and four and a half years later. I tend to feel that much of my life has passed me by, washed away by death and loss and grief.

Wednesday, February 02, 2011

Seems appropriate that right after the snowflake ball (a girl scout activity) we had a lot of snow flakes. 18 degrees and dropping, snow and glare ice, just closed the freeway again. I'm off to work, they only gave us a delayed opening.
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I wanted to add something. This last week was really rough. It started with some events that triggered many of my lingering grief issues. Then I was dealing with them while my wife was out of town and we had one of those very rare times when grief hit us both at the same time (usually we are lucky enough to take turns so that we are able to comfort each other).

I had some dramatic hostility with a guest post I did for another blog -- it felt like people were being hostile just to score points without paying attention to what I was really saying (talking about my feelings and how it hit me, not about anyone's real motives). Of course the scheduling for the post and when I had to interact with it got moved so that it overlapped a time of intense personal grief and pain for me.

But then, but then, I got to sleep in the same bed and hear my wife breath, feel her presence. Saturday morning I've got a group of guys I spend some time with, an hour or so. Been doing that for a while (and, of course, I have my wife to thank for pointing them out to me and suggesting I join the group). I walked into the room and saw their faces. The last of the pain and frustration just melted away.

Seeing them, seeing my friends, after being able to just sleep in the same bed with my wife and just know that she was there, made my heart feel so very glad. It is hard to express.

Then, that night, I had the Snowflake activity with my daughter Rachel. Yesterday I was able to talk with my daughter Heather. It is funny, just how important they are to me and how I've learned to explain that to them. Rachel told me that something I was explaining made her feel guilty. I told her "I don't want you to feel guilty, I want you to realize how important you are."

Suddenly she smiled. I made sure to tell Heather the same thing yesterday. A wire transfer wasn't going to work right so my wife drove down to the bank, on two inches of ice (while I got ready to go into work since the office decided to open) to make a transfer between accounts in cash for Heather. She did that because Heather is important to us. I only told her about the details so she would realize that she was important enough for her mom to make sure that happened the right way.

But it is an important message, how important people are and that things are being done not because they've made themselves an inconvenience, not because they've resulted in sacrifice or discomfort for you, but because they are important enough that you are gladly doing things, be it getting up in time to meet with a bunch of guys drinking their coffee at 7:00 a.m. on a Saturday, or driving to the bank to make a transfer so things are not delayed, or dressing up for a girl scout activity.

Or staying awake to listen to someone breathe.

[Yep, that picture is what it looked like after the temperature went from 70 degrees to 19 degrees and the sky dropped two inches of ice on the ground with a dusting of snow. Was very slow going into work and the temperature dropped just a little more.]